"THESE ARE THE DOG DAYS OF DEREGULATION." That's how Federal Energy Regulatory Commission chairman James Hoecker put it last month in Houston at his luncheon talk at the Sixth DOE/NARUC National...
Northwest Passage: BPA's Changing Role
The treacherous journey toward a more efficient and transparent Northwest power market may be nearing its conclusion.
Steve Wright stands at the helm of an agency with a seemingly impossible task. As CEO and administrator of the Bonneville Power Administration (BPA), Wright must serve a broad spectrum of interests, from aluminum smelters to sockeye salmon. And no matter what he or anyone does, it's impossible to make them all happy at the same time.
In 2000 and 2001, when power shortages caused brownouts and price spikes on the West Coast, several load-serving utilities and big industrial customers showed up at BPA's door, looking for power. These customers previously had negotiated out of their BPA contracts so they could obtain cheaper supplies on the wholesale market. Now they were seeking shelter under the federal dams of the Columbia River system.
BPA took them back, pursuant to law, tradition, and regulatory edict. 1 But the sudden influx of demand outstripped BPA's generating resources by more than 30 percent. The agency was forced to take drastic measures. It bought down its commitment to some industrial customers, and it contracted for more than 3,000 MW of additional purchased power.
Those contracts were signed in October 2001-virtually the worst possible time to buy power in the Western wholesale market. But BPA's administrator had little choice.
"There's a limited amount that you can do in that situation," Wright says. "You're dealt a set of cards and you can move them around, but you have limited options to change the fundamental setup."
Wright refers to his obligations under the Northwest Power Act of 1980. The act directs the BPA administrator to "acquire any electric power required by ... any customer or group of customers to enable them … to serve firm load."
So BPA met the demand, but at a huge cost. Moreover, following its usual procedure, BPA "melded" the high-cost purchased power with its own low-cost hydroelectric and nuclear capacity, to distribute costs among all its customers. But the contracted power was so expensive that it resulted in a 46 percent rate increase across the board. BPA's other customers were furious.
"No one wants to repeat the experience of the last three years," says Patrick Reiten, president and CEO of PNGC Power, a Portland, Ore.-based consortium of generation and transmission cooperatives. "The region has come to a solid consensus that Bonneville should not be serving loads in excess of the resources that it has. And to the extent it must, the cost should be picked up bilaterally by the entities that want those resources."
Such an elementary proposal seems eminently reasonable, but in fact it has added fuel to a raging inferno of controversy in the Pacific Northwest. The conflagration centers on disagreements over how BPA operates; who gets dibs on Bonneville's power capacity; and, ultimately, the operating structure of the entire Northwestern power grid. Such momentous issues, furthermore, are being considered within the context of persistent drought conditions, endangered fish populations, and a massive budget shortfall.
Given such challenges, few would envy Administrator Wright's position. Yet Wright